Letters

March 22, 2005

Conveyance Tax

Should Remain

Local property taxpayers in Connecticut are about to take a loss of almost $50 million, unless the General Assembly acts to continue the recent increase in the real estate conveyance tax before it is scheduled to expire July 1.

From its inception in 1967 until 2003, the tax remained at 0.11 percent for all property regardless of its location or nature. The real estate conveyance tax is paid at closing. In 2003 the General Assembly, recognizing that municipalities were reeling from severe cuts in state funding, decided to increase the tax -- until July 1, 2004 -- in all towns to 0.25 percent, with an optional 0.25 percent addition for certain communities with particular economic hardships. The state also collects a 1 percent tax on each transaction. These percentages amount to, for every $1,000 in market value, $10 in state tax, and $2.50 (or $5) in local tax.

In 2004, the General Assembly continued the tax to 2005, and made permanent the 0.25 percent additional increase for distressed communities.

Conveyance tax revenue can be significant, according to the Connecticut Conference of Municipalities. The difference between what a town or city would receive at 0.11 percent and what it would receive at 0.25 percent is especially significant. For some smaller towns like Chester, that difference is $25,000. For other communities, it approaches or exceeds $1 million.

The public policy rationales that prompted the increases in the conveyance tax still exist. Although some state grants to local governments have increased, municipalities are still well behind where they were before the state funding cuts went into effect.

Municipalities and local property taxpayers continue to count on the conveyance tax to help bridge the gap. If that revenue is lost, towns and cities will once again have to put the squeeze on their residents and businesses.

Further, it is clear that the increase in the real estate conveyance tax has not hurt the housing market, as realtors and homebuilders had predicted when it was first enacted. There has been no noticeable drop in home sales since the increase. The housing market in our state is very strong.

If the legislature fails to renew the increase, this much-needed local property tax relief will disappear. We can and should not allow this to happen when many communities are still struggling to stay afloat financially.

Martin L. Heft

Chester

The writer is the first selectman of Chester and a member of the CCM board of directors.